HSBC may be the world’s local bank, according to its ubiquitous advertising campaign. But for Stuart Gulliver, head of the global banking and markets business that generates just over half of the bank’s pre-tax profits, there is no point in being local for the sake of it. It’s all about networking.

Head of global banking and markets, HSBC

Stuart Gulliver

“It is about creating a network effect and leveraging our client relationships in developed markets with the long-standing relationships we have built up over many years, if not decades, in faster growing markets around the world,”

Gulliver told Financial News last week after HSBC announced its second best half ever in global banking and markets – effectively its corporate and investment banking business – with revenues in the first six months of this year of $10.9bn and pre-tax profits of $5.6bn.

“Our strength in Germany or France, for example, is not solely our local presence, but in what we can offer to clients in those markets in terms of linking them up with higher growth markets in Latin America, Asia or China,” he added.

Building this network is one of the four pillars of Gulliver’s plan to expand the banking and markets business, along with closer co-operation between the investment bank and private banking, rebuilding its equities business – for perhaps the fourth time in 20 years – and an ambitious IT project that will bring together all of the division’s back-office systems and provide access to all of its products to all of its customers on a single platform.

“Some of our biggest gains in the past few years have come not from just taking advantage of dislocation and increasing our market share in our existing markets, but in leveraging the relationship we have with our biggest clients in developed markets.

“Their growth is coming from and will continue to come from emerging markets. We’re already there, we have shown a long-term commitment to these markets, and we have a very strong and conservatively managed balance sheet,” said Gulliver.

HSBC talks of the “new Silk Road”, a phrase coined by its chief economist Stephen King, running from China, through India, the Middle East and Africa to Latin America.

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Gulliver’s main focus is on expanding HSBC’s investment banking business, but he is adamant that the aims are more modest and the scale more judicious than the bank’s ill-fated three-year experiment between 2003 and 2006 to build a top-tier investment banking business under John Studzinski, who was hired from Morgan Stanley as Gulliver’s co-head.

HSBC spent an estimated $500m on hiring bankers, and building up its equities business, only to lay many of them off in the past few years after Studzinski left to join Blackstone.

Instead, HSBC is focusing the expansion of its equities and advisory business in Hong Kong, China, Asia, India and the Middle East, while ensuring it retains a strong local presence in the UK, France, Germany and, to a lesser extent, the US.

The aim is to replicate the success of HSBC’s debt capital markets business, which ranked first in all emerging markets in the first half of this year, according to Dealogic, topping the rankings in Asia and the Gulf, and coming third in Latin America.

Equities and advisory have a long way to go. The bank did not rank in the top 10 in Asian or European equity capital markets in the first half, and in Europe it ranks 17th in M&A.

There is a sense of playing catch-up here. Rewind 15 years and HSBC owned the dominant Asian and emerging markets equities house in the world – James Capel & Co – which it had inherited from its acquisition of Midland Bank in 1993, but lacked strategic direction.

Gulliver said: “Our build-out in equities is a more modest expansion where we can link investors in one region directly with origination in another, particularly Asia. You are not going to see us trying to compete in the domestic US equities markets, for example.”

He referred to recent moves such as the transfer of Russell Julius, former global head of equity capital markets, from London to Hong Kong to become head of banking in the region, and the recent appointment of Sunil Sanghai from Goldman Sachs to run the Indian banking business.

Alongside this growth in equities and advisory, Gulliver wants to get the private bank, for which he was given responsibility last year, and the investment bank to work more closely together.

This approach was one of the mantras of the industry two or three years ago, with Credit Suisse’s “One Bank” strategy being a notable example of success.

“In the emerging markets, it’s all about face-to-face personal relationships, which we have built up over many years,” Gulliver said. “Many of these people want direct access to the IPOs or bond issues, straight off the primary desk.”

HSBC has started a programme to hire more than 500 private bankers in Asia, the Middle East and Latin America.